After all, this time last year it is safe to say double-digit inflation in the West, the most aggressive U.S. monetary policy tightening cycle in 40 years, Japanese FX intervention to buy yen, and by some measures the biggest ever crash in government bonds were not consensus calls.
As analysts at Saxo note, these are "unlikely but underappreciated events which, if they were to occur, would send shockwaves across the financial markets as well as political and popular cultures." Yet what is striking about them is how many seem fairly plausible. The offshore yuan rising to 6.40 per dollar or the euro rising to $1.25? The Nasdaq falling another 50%? President Biden impeached, the creation of a joint European Armed Forces, or widespread price controls to cap official inflation?
The yuan at 6.40/$ would require it to appreciate around 9% from current levels, not that controversial given that it weakened 9% last year. Plus, it was trading at 6.40/$ only eight months ago. The economic, financial and political foundations for that recovery might be harder to build, but if peace in Ukraine comes as suddenly as war did, you wouldn't bet against it. Deutsche Bank's baseline 2023 economic outlook even has euro zone growth outpacing U.S. growth next year.